# 4 Finance Formulas All Excel Geniuses Know

Whether you’re looking to get ahead in business or simply keep better track of your bank accounts, knowing your way around a Microsoft Excel spreadsheet will take you far. That’s easier said than done, however. According to the Houston Chronicle, Microsoft Excel employs 53 functions for financial calculations alone — everything from annuities to car loan payments.

How do you work your way around everything Excel has to offer? We’ve compiled the four most important Excel formulas to help you get your finances under control. Whether you are buying a car or investing for the future, these hacks will help you stay on top of your finances.

## The Best Excel Financial Functions

### 1. Payment Function

=PMT(rate, nper, pv, [fv], [type])

According to Bob Flisser, vice president of Software School, Inc., “the most important function is the payment function … [which] calculates how much you’ll pay every month when paying back a loan (auto loan, mortgage, anything).”

Flisser explained that this function helps borrowers understand potential scenarios.

“What’s very helpful are data tables and scenarios, because they can help you play ‘what if,’ such as how much would the payment be if the interest rate were higher or the principal were lower.”

### 2. Rate Function

=RATE(nper, pmt, pv, [fv], [type], [guess])

Stephen Fraga, CEO and founder of AcademyX, recommended the rate function for predicting how investment and loan interest have compounded over time. The rate function gives investors an accurate figure of interest earned for each rate period by plugging data into a compound interest equation.

### 3. If Function

=IF( condition, [value_if_true], [value_if_false] )

This conditional function helps individuals determine if their financial situations entitle them to tax deductions or credit. The earned-income tax credit, for example, has variable income tax credits for different filers’ income levels.

By comparing one or more values against a static value, individuals using the appropriate income threshold can determine if they qualify for the tax credit.

### 4. The Effect Function

=EFFECT(nominal_rate, npery)

Investors who use this function will see the effective or real rate of interest on their investments or loans on an annual basis. Looking at the original interest rate and the number of times interest is compounded, investors will be able to multiply the true interest rate by the principal invested or financed and have an instant figure.

We have just scratched the surface of Excel’s finance functions — start with these to become an Excel whiz.

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#### Thomas Hill

Thomas Hill is a full-time published freelance writer and President and Owner of Clairvoyant Internet Marketing LLC. Featured in American and world-wide publications, he is a successful writer and journalist that writes on a multitude of financial, legal, and general topics. He has attended Central Connecticut State University in New Britain, Conn. and has direct legal experience.